Hewitt Shifts Course After Recent Missteps

Despite its troubles, Hewitt Associates is prospecting for new business, but now it’s a bit older and wiser.

That was the message given by Mike Wright, global HRO sales co-leader at Hewitt Associates, during his presentation last month at the Conference Board’s 2006 Human Resource Outsourcing Conference in Chicago.

In his speech, Wright shared lessons the organization has learned as a result of an extensive review of its HRO business during the summer. In the past few months, the company has struggled to implement deals.

“I come to you pretty humbly this morning,” Wright told attendees, noting the troubles the company has had.

Wright emphasized the importance of constant communication between providers and their clients. “In the past when we have had problems, our tendency was to put up barriers, put our heads down and figure out what’s going on,” he said. Now Hewitt is working to include clients in the process more. This includes having customers visit its service centers and offer ideas on how to address problems.

Aligning goals and expectations is another crucial step for HRO deals to be successful, Wright said. For Hewitt, that means meeting the set goals in the service level agreements. But sometimes, Hewitt has found that a year after it has signed a deal with a buyer and taken over the HR processes, the buyer’s employees who were handling those processes are still with the company.

“And then the buyer asks us why we haven’t met certain cost reductions,” he said. “I’m not trying to pass the buck; Hewitt has to meet its expectations, but this has been an issue,” he told Workforce Management after his presentation. To address the issue, Hewitt is adding language in its contracts to make sure buyers eliminate the positions that are made redundant because of outsourcing.

Probably the biggest lesson learned for Hewitt is that the “lift and shift” model, whereby it would just take over a buyer’s HR processes and attempt to do them cheaper, doesn’t work, Wright said.

For those clients and prospects who want Hewitt to take over their operations and run it more cheaply, Wright said there may be other providers to do that, “but it’s not us.”

At the same time, Hewitt is moving away from a completely customized approach and is talking to clients about adopting standards. For clients resistant to that, Hewitt tries to get them to think “What is the value added by customizing these processes?” Wright said. It doesn’t necessarily make sense to customize payroll and benefits administration, he said.

Hewitt and other providers have a challenge ahead of them as they attempt to educate buyers about the advantages of using a “one to many” model, analysts say.

“They are going to have to go into the economic tradeoff discussion,” says Michel Janssen, an analyst at the Hackett Group, an Atlanta-based consulting firm. “Until now the conversation around HRO has not been a two-way dialogue; it’s been all ‘Yes, we can do that.’ ”

One way for providers to pitch the one-to-many model is to emphasize that by doing so, they will become “a repository of best practices of several large clients,” says Andy Anderson, an attorney in the Chicago office of Morgan, Lewis & Bockius.

“It’s more than just cost and simplification,” he says. “If you can take advantage of that as a buyer, you should at least consider it.”

—Jessica Marquez